China con­tin­ues play­ing its role in global growth

De­spite ad­just­ing its struc­ture, it is still a driver for the world

China’s eco­nomic growth has slowed in re­cent years, but its con­tri­bu­tion to the world econ­omy re­mains sig­nif­i­cantly more than that of other coun­tries’, which sig­ni­fies the vi­tal role it has played in main­tain­ing global eco­nomic vi­tal­ity, say an­a­lysts.

China’s GDP growth was 6.9 per­cent in 2015, the slow­est in 25 years. Inthe first half of 2016, it reg­is­tered an even lower GDP growth of 6.7 per­cent, and the In­ter­na­tional Mon­e­tary Fund fore­cast in July that China’sGDP­growth this year could be 6.6 per­cent, trig­ger­ing con­cerns that the coun­try might be caught in the low-rate growth trap for some time.

Rel­a­tive to other coun­tries, es­pe­cially the de­vel­oped ones, how­ever, China’s growth is quite im­pres­sive and it has con­tin­ued to make a sig­nif­i­cant con­tri­bu­tion to global growth. In the 1980s and early 1990s, emerg­ing mar­ket economies started play­ing a larger role in global growth, con­tribut­ing about 25 per­cent to world eco­nomic growth. From the late 1990s un­til now, emerg­ing-mar­ket economies have contributed about 70 per­cent to global eco­nomic growth, with China’s con­tri­bu­tion es­ti­mated at about 30 per­cent, says Wang Guangqian, pres­i­dent of the Cen­tral Uni­ver­sity of Fi­nance and Eco­nomics.

Al­though es­ti­mates vary, re­searchers gen­er­ally agree China’s con­tri­bu­tion to global eco­nomic growth in re­cent years ranges from 25 per­cent to 40 per­cent. From 2011 to 2015, China’s av­er­age GDP growth was 7.3 per­cent while the global av­er­age was only 2.4 per­cent, with the United States, Ja­pan and Ger­many reg­is­ter­ing 2.4 per­cent, mi­nus 0.1 per­cent and 1.6 per­cent growth, says Wan Xiangyu, a re­searcher at the In­sti­tute of Quan­ti­ta­tive and Tech­ni­cal Eco­nomics of the Chi­nese Academy of So­cial Sciences. Dur­ing that pe­riod, he says, China contributed 25 per­cent to global GDP growth.

In 2014 alone, China contributed 27.8 per­cent to global growth, mak­ing it the top con­trib­u­tor that year, says Ding Yi­fan, a re­searcher at the De­vel­op­ment Re­search Cen­ter of the State Coun­cil, China’s Cab­i­net. In 2015, China contributed about 33 per­cent to global growth, the IMF said in a re­port in Au­gust.

Al­though China’s eco­nomic growth rate has slowed, given its fast ex­pan­sion of over­all scale, the Chi­nese econ­omy’s con­tri­bu­tion to global growth has be­come even more sig­nif­i­cant.

China has achieved such a growth against the back­drop of the frag­ile global eco­nomic re­cov­ery and do­mes­tic eco­nomic re­struc­tur­ing.

The low global growth has af­fected the de­mand for China’s ex­ports, one of the tra­di­tional growth en­gines for the Chi­ne­seecon­omy, an­a­lysts say. It has also af­fected the flow of cap­i­tal into the coun­try.

On­the do­mes­tic front, China has been unswerv­ingly push­ing for­ward eco­nomic re­struc­tur­ing to re­bal­ance its econ­omy and make its growth more sus­tain­able. Such a drive is set to af­fect its growth, say an­a­lysts.

More­over, China’s growth used to ben­e­fit enor­mously from the so-called div­i­dends of glob­al­iza­tion, eco­nomic re­form, de­mo­graph­ics and in­dus­tri­al­iza­tion, but those fac­tors no longer fa­cil­i­tate its growth, says Liu Yuanchun, re­searcher of the Ren­min Uni­ver­sity of China.

China’s de­mo­graphic struc­ture, for ex­am­ple, has changed, with the num­ber of young work­ing-age peo­ple start­ing to de­cline. “China’s trade sur­plus will also de­crease grad­u­ally,” Liu says.

De­spite these ad­ver­si­ties, China has con­tin­ued to pro­vide solid sup­port for global growth. For ex­am­ple, it in­vested $118 bil­lion over­seas in non-fi­nan­cial fields in 2015, up by 14.7 per­cent yearon-year, ben­e­fit­ing the economies of des­ti­na­tion coun­tries. “China’s out­bound in­vest­ment has cre­ated some mir­a­cles,” says Ding.

For in­stance, in the 1990s, when China did not make any large-scale in­vest­ment in Africa, the con­ti­nent was a for­got­ten land and didn’t at­tract much over­seas in­vest­ments. En­ter­ing the 21st cen­tury, China started in­vest­ing in the con­ti­nent and now it has be­come a pow­er­ful global pow­er­house, Ding says. “All this has much to do with China’s large-scale in­vest­ment in the con­ti­nent.”